KCB Group Joins Kenyan Rival in Hunt for Growth in Congo
(Bloomberg) -- Kenya’s biggest bank by assets is in talks to acquire a lender in the Democratic Republic of Congo, the vast mineral-endowed central African country.
“We’re engaging with two institutions today that are in Congo,” KCB Group Ltd. Chief Executive Officer Joshua Oigara said in an interview on Thursday. The bank will settle on a single purchase, preferably one with a “national footprint, available in all provinces,” Oigara said, without giving more details.
KCB’s Kenyan rival, Equity Group Holdings Plc, beat it to entry into the DRC market of more than 92 million people. Equity Group now owns the second largest of the nation’s 17 commercial banks. The lenders have for long coveted Africa’s top copper-producing country, where China Molybdenum Co. plans to double the size of its giant copper-and-cobalt unit with a $2.5 billion investment and Glencore Plc intends to reopen its mine in the country after two years.
The Nairobi-based bank sees opportunity in lending, fees and transaction incomes, funding manufacturing and expanding its customer base in the DRC.
The DRC is more open to allowing foreign lenders to set up shop than Ethiopia, where KCB is also keen on an acquisition, KCB Chairman Andrew Wambari told an investor briefing on Thursday. “We don’t want to go into greenfield anymore there,” Wambari said, adding, “mergers and acquisitions is something we’ll continue to do, but very selectively.”
Until banking regulations in Ethiopia change in favor of foreign participation, Congo will be the next market for KCB, Oigara said.
In the meantime, the lender doubled its six-month profit to 15.3 billion shillings ($139.6 million) and plans to channel funds it would have spent on an interim dividend on concluding other acquisitions in Rwanda and Tanzania instead. That will add 100 billion shillings to its more than 1 trillion-shilling balance sheet.
A Congo entry would also enable KCB to quickly double its foreign-currency loan portfolio, which is equivalent to about 45 billion shillings currently, Oigara said.
The bank plans to triple its loans to small and medium businesses to 150 billion shillings in the next two years and ramp up mobile phone-based lending, according to Oigara. “We do expect to reach 200 billion shillings in mobile lending in the next two years. This year we should exceed 100 billion shillings,” he said.
KCB also plans to grow its green financing loan book fivefold in two years from about 75 billion shillings currently, Oigara said.
The bank’s shares fell 3.1% by 2:48 p.m. in London, as investors disappointed about the lack of a dividend sold.
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